Law & Taxation mentor Richard S. Morse Jr. responds:
Too often, in my experience, entrepreneurs are looking for money from any source without evaluating the "quality" of money and what's behind it. There's a lot of money around, and entrepreneurs of fast-growth companies must consider what so-called "smart money" can offer them.

I always recommend that the entrepreneurs do as much due diligence on the venture capital firm as the venture capital firm does on them. Entrepreneurs should talk to other companies the firm has invested in, particularly ones that were in trouble before they became successful. It is important to find out how the venture capitalists on those boards reacted during tough times. For instance, if two different venture capital firms were working with the company during tough times, did the individual board members from the firms work well together, or did they squabble and work at cross-purposes?

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